Fitch Upgrade Ghana’s Rating from Restrictive Default to ‘CCC’

Fitch, the ratings agency, has upgraded Ghana’s Long-Term Local Currency Issuer Default Rating (IDR) to ‘CCC’ from ‘RD.’ They have also affirmed Ghana’s Long-Term Foreign-Currency IDR at ‘RD’ and the Country Ceiling at ‘B-.’

Fitch assigned ‘CCC’ ratings to two interest-only bonds issued upon the completion of pension fund holdings through the Domestic Debt Exchange. Additionally, ‘CCC’ ratings were assigned to four domestic US dollar-denominated bonds issued on September 4, 2023.

The upgrade of Ghana’s Long-Term Local-Currency IDR is attributed to the successful completion of the Domestic Debt Exchange Programme. Fitch notes that this program has normalized relations with a significant majority of local currency creditors, with a high participation rate of 92% on local-currency government bonds, Cocoa bills, and locally issued foreign-currency bonds. Some non-participating bondholders are domestic individual bondholders, for whom authorities have committed to maintaining current payments following a memorandum of understanding signed in May 2023.

This upgrade comes with a significant reduction in debt service. The local-currency debt exchanges result in a ¢52 billion reduction in debt service for 2023, equivalent to 6% of estimated 2023 GDP or 39% of estimated 2023 revenue and grants. In contrast, the International Monetary Fund reported that debt service represented 117% of revenue in 2022. Of the total debt service reduction, approximately 1.8% of Gross Domestic Product (GDP) or 12% of revenue and grants is attributed to interest payment reduction in 2023.

Fitch further notes that the domestic US dollar-denominated debt exchange contributes an additional ¢5.0 billion debt service reduction in 2023, accounting for 0.6% of GDP and 4% of revenue and grants. Furthermore, a reduction is anticipated from the 50% principal haircut agreed upon with the Bank of Ghana concerning its holdings of ¢71 billion local-currency nonmarketable debt.

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